Singapore Company Trek: Louis Vuitton

By Maryam Mohammed, Global MBA student 2012-2013, Qatar

During our term in Singapore we had the opportunity to visit a number of companies and to learn more about how they operate. One of the most educational and enjoyable visits was to the Louis Vuitton Masion at Marina Bay, which is the largest in the world.

The store sits on its very own designated island. The internationally acclaimed architect Peter Marino designed this project, while fifteen internationally recognised artists from the likes of Richard Deacon (who created a magnificent sculpture specially for the maison) and the famed illustrator Ruben Tolledo.

The use of the colour blue was particularly peculiar in this store as it is not a colour that is traditionally used in the design of Louis Vuitton stores. However, the use of this colour was incorporated into the stores design as it complimented the store's concept of transporting visitors into feeling like they are on a yacht in the sea.

Being present at such a beautiful setting, while walking around the store and being shown the various sections, provided the class with an inspiring backdrop to engage with our host and ask questions. Even those who did not have an interest in the luxury or retail sectors seemed to be very engaged with our host and eager to learn more about the company.

This was definably one of the most impressive Louis Vuitton stores that I have visited, not only because of its sheer size but also because of the product selection that was available. There were sections that contained books and stationary, to nautical menswear to the most exquisite collection of exotic skin bags.

To end the visit on a special note, we were shown the watches and jewellery section. Watches and jewellery is a relatively new product line for Louis Vuitton that I never thought would be of a level of design and craftsmanship that would be on par with the jewellers of the Place Vendome. It was particularly interesting to learn that Louis Vuitton have patented two new diamond cuts based on their iconic monogram flowers, a rounded flower diamond cut and pointed cut flower diamond, which have 77 facets as opposed to 61.

As I am particularly interested in learning more about the luxury sector this was a great opportunity for me to engage with people from the industry and to ask questions and learn about it first hand. During my time in Singapore, I was also able to expand my understanding of the luxury sector through another trek to DFS Galleria, attend a talk with the Managing Director or Hermes in Asia amongst another things.

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A Word from the Associate Dean: Recession in Europe and Implications for India and South Asia

By Ashok Som, Associate Dean of the Global MBA

Last week in Singapore, Professor Ashok Som participated in a panel discussion on the topic of Recession in Europe: Implications for India and Southeast Asia. Watch the conference video below!


The economic crisis in Europe reaches far beyond just the EU, having a tangible impact on India and Southeast Asian countries. The effect is felt on both a macro and micro level.

At the macro level, the cycle of confidence which evolves over a very long time horizon plays a decisive role; success breeds confidence which unfortunately turns into over-confidence and even arrogance. Complacency sets in. The collapse of bubble based upon this over-confidence leads now to under confidence, which is followed by efforts to rebuild. Thus the cycle begins again.

India and Southeast Asian countries are affected through trade and financial channels, as Europe and the US account for a third of India’s exports. Even if a full recession is averted in Europe, its slow growth would have implications for India. The EU accounted for nearly $47 billion of Indian’s total exports of $254 billion last fiscal year, making it a larger destination than North America. Between 2004 and 2010, services account for 66% of the increment in India’s GDP, of which 9.4% were from software. The deceleration or decline in software export revenues is bound to have an adverse affect on GDP.  Austerity measures put in place by European countries and falling consumer spending may impact exports from India. Though China is India’s largest trading partner, it mostly imports raw materials for finished products for the rest of the world.

Further impact is seen with capital flight, the outflow of foreign institutional investment from the equity market. This has led to a steep depreciation of the rupee. Public debt is another concern. Though India’s gross public debt to GDP ratio is down to 66.2% from 75.8% in 2007, it is will among the highest in the region.

While a recession in just Europe or just the US might not be enough to cause a global recession, the collapse of both economies likely would. Asia’s developing economies would take a significant blow to exports, and GDP growth would decelerate. The UN has stated that a prolonged recession in Europe could have significant impact on growth across South Asian economies, including Sri Lanka, India, and Pakistan. In 2011, Bangladesh, India, and Sri Lanka recorded GDP growth of 6.5% or higher, while the Islamic Republic of Iran, Nepal, and Pakistan registered growth rates of less than 4%. Further, downgrading of sovereign creditworthiness by credit rating agencies would likely be more negative than previously experienced. Further, the services sector in India, including IT, contributes as much as 52% to the GDP growth and is directly linked to job creation and sustenance. For many Southeast Asian countries the Thailand, the Philippines, Malaysia, Indonesia, the recession is occurring in the middle of a long and incomplete transition from authoritarian to democratic forms of governance. Other countries, such as Vietnam, have retrained authoritarian governance but depend on continued high growth to maintain support for the government. The impact of the global recession on exports, therefore, threatens political stability in a number of countries in the region.

The economic outlook towards Asia-Pacific would likely be more negative than previously experienced, and a larger number of negative ratings actions would follow such as downgrading by credit rating agencies.

Within the macro phenomenon I have identified a paradox. A recent study by the Stockholm International Peace Research Institute (Sipri) pointed out that India has in recent years become the world's largest recipient of arms, accounting for 10 per cent of global arms imports in the period 2007-11. In contrast, China, which was the largest recipient of arms between 2002 and 2006, fell to fourth place in 2007-11 due to indigenization over the past couple of decades resulting in a $119 billion defense budget for 2012-2013: China purchases more and more from within its country due to its policy of technology transfer. Most of the donor countries are from Europe be it France, UK, Russia.

On a micro level, multinationals face both challenges and opportunities. Reforming the tax structure in India is an obstacle, but access to a market that is growing while Europe and the US stagnate is an opportunity. A rich talent base exists in India and South Asia, and with growth comes new business opportunities in retail, insurance, private banking, etc. More and more, members of the educated workforce are leaving Europe to seek a better life in emerging economies around the world. Brazil, Canada, and Australia are some of the countries seizing this opportunity to attract top talent. On the higher education front there are implications. Recession in Europe means less jobs and countries tightening their immigration rules and policies for jobs for foreigners which in-turn will lead to less number of students opting to study from India and S.E. Asia in European Universities and thus in the talent pool of the region.

By the way of conclusion the most important moot point is to regain the cycle of confidence and trust within the European Union and that of India and S.E. Asia.

A Word from the Associate Dean: Luxury in India: Impediments to Growth

Adapted from a presentation given at the Mint Luxury Conference in India

For a nation to succeed in an industry, four elements are at play: the demand within the market, related and supporting industries, firms that rival and compete within this structure to create innovations, and the environmental (political, legal, economical, social, technological) conditions necessary for the industry. These include infrastructure, high duties, varying tax structures, bureaucratic delays, etc. With these four conditions to consider, the role of the State is also key to making it successful.

The first condition is demand. Is there a demand for luxury goods in India? Data from studies done by  Bain & Co., McKinsey, AT Kearney, Credit Suisse, KPMG, ASSOCHAM-YES Bank indicate yes, and that this demand will grow exponentially between now and 2015 and 2030. Users of luxury goods will consume in India and/or abroad. Very few people buy luxury goods every day. Luxury buying is not a rational behavior. A woman will buy a dress the same day, not wait and take a plane to buy it later to save some money. A man in love wants to buy a solitaire ring; he will not wait for months to buy it during his next travels, to save some money. Demand exists.

The second condition is the growth of related, supported, and upstream industries which help, provide, and feed the luxury industry. It is not a secret that India supplies a considerable proportion of materials and ideas that go into the creation of luxury goods. The watches and jewelry sector is the leader here, followed by leather and accessories, perfumes and cosmetics, and consumer wines and spirits. For example, in March of 2013 French firm Pernod Ricard[1], which sells brands such as Chivas Regal, Absolut Vodka, Malibu Rum, Ballentine, etc., became the No. 1 most profitable firm in India. According to Alexander Ricard, Chairman and CEO, this is a result of meticulously following a “trading-up” or premiumization and innovation strategy aimed at the emerging middle class. If a French company can understand how to take advantage of the supporting and related industries such as tourism, hotels, and the needs of the growing middle class, it might not be so difficult after all.

The third condition must incorporate oligopolistic firms that compete within this structure to create innovations. This condition is gathering momentum in India, for example with Genesis Colors and its tie-up with Jimmy Choo, Burberry, Canali-Armani, Etro, Paul Smith, Sephora, Reliance Brands with Paul & Shark, Zegna, Thomas Pink, DLF Brands with Salvatore Ferragamo, and a host of other players. Most of the French and Italian brands are present in India in some way. As both the brands and their partners compete for retails space, for loyal customers, for a product-pricing niche, and for access, innovations are bound to happen which will in turn create an ecosystem to bolster the luxury industry in India. A key question to keep in mind is the challenge of finding the “needles in a hay stack” customers early on, the loyal customers such as those found by LV in the wedding market Delhi-Haryana.

The fourth, environmental factor is still evolving and not so bleak. The single brand and multi-brand retail bill is on its way, and while there are impediments, it is a first step. What can happen in China cannot happen in India. It is the stark reality of the world’s largest democracy. India must hold on and understand that it will take time, also recognizing that here the State has a role to play. On the other hand, India has always outshone and gone ahead with its entrepreneurs (IT industry, family groups…). What in China has always been accomplished with the State, India has shown through history that it can innovate despite the State. Of course, a proactive role from the government always helps as a catalyst.

By the way of conclusion my key takeaways are as follows:

  • The crystal ball shows that within the four main (demand conditions, upstream industries, oligopolistic behvaior and environmental factor) which India needs to tackle – three of them are positive.

  • The fourth factor condition of environment will always take time and we need to be patient.

  • A proactive role from the Government always helps as a catalyst.

[1] The maker of Absolut Vodka and Chivas Regal Scotch whisky crossed the $1-billion sales mark in the country in 2011-12 when its sales rose 34% to Rs 5,941 crore, making India the fourth-largest market for Pernod Ricard. Its net profit soared 77% to Rs 593 crore during the period, according to the Registrar of Companies, where it filed the financial results in January, making India the fifth-largest contributor to the French firm's worldwide profits.